Timid long on SPY - Indicators suggest a triangle, not H&S
I opened a long position in SPY at the friday's crazy sell-off close (heard some chatter of end of month index rebalancing, and given the crazy spike in crude oil, these prices aren't confirming the support break that many people wish for, in my view). I base this trade on some positives the market doesn't seem to be taken into consideration, and could lift equities for the next week:
- Solid earnings for some large caps (AAPL the clear winner of earnings season, but some consumer discretionary, financials and tech names also impressing; NFLX up +30% on the month to give an example).
- European QE which is an obvious risk-on factor.. I expect some comments over the weekend regarding this matter.
- Short-term technicals suggest we're at oversold/support levels (trading near the lower Boll band, and tightening bands; positive divergence on the daily RSI; trading inside the Ichimoku cloud, which suggests indecision more related to range-trading than a downtrade).
All taken into consideration, I am wary that sentiment is becoming more bearish by the day on the market; hence I'm placing a stop at the lower Bollinger Band (maybe a bit lower to avoid algo stop-hunting), and also hedging with long USTs positions.
The rationale of the trade is LONG but only for the week (I think a triangle formation is coming to shape here, so obviously makes sense to go long at these levels). I do think equities are headed for lower lows in the remainder of the year, but this is not the time to start the downtrend.
PS: Bullard Warns of Asset Bubble Risk If Fed Keeps Rates Too Low... watch out for panic selling ahead of an early June hike! That would be a clear sell signal. But for now we're heading for a triangle, not H&S.
- Solid earnings for some large caps (AAPL the clear winner of earnings season, but some consumer discretionary, financials and tech names also impressing; NFLX up +30% on the month to give an example).
- European QE which is an obvious risk-on factor.. I expect some comments over the weekend regarding this matter.
- Short-term technicals suggest we're at oversold/support levels (trading near the lower Boll band, and tightening bands; positive divergence on the daily RSI; trading inside the Ichimoku cloud, which suggests indecision more related to range-trading than a downtrade).
All taken into consideration, I am wary that sentiment is becoming more bearish by the day on the market; hence I'm placing a stop at the lower Bollinger Band (maybe a bit lower to avoid algo stop-hunting), and also hedging with long USTs positions.
The rationale of the trade is LONG but only for the week (I think a triangle formation is coming to shape here, so obviously makes sense to go long at these levels). I do think equities are headed for lower lows in the remainder of the year, but this is not the time to start the downtrend.
PS: Bullard Warns of Asset Bubble Risk If Fed Keeps Rates Too Low... watch out for panic selling ahead of an early June hike! That would be a clear sell signal. But for now we're heading for a triangle, not H&S.